U.S. Building Boom Helps Lumber Industry Cut Its Borrowing Costs

The U.S. home-building boom is helping North American forestry companies secure better and cheaper borrowing, according to Credit Benchmark.

With lumber prices more than tripling from a year ago, credit ratings for forestry companies in the U.S. and Canada have improved and are likely to keep rising over the next year or two, said David Carruthers, head of research at Credit Benchmark.

Low interest rates helped trigger a building frenzy after the pandemic led many families to move to suburbs, away from crowded cities. For lumber providers, surging revenue and lower borrowing costs are helping them expand.

“Now, everyone’s scrambling for materials,” Carruthers said in an interview from Scotland. “The house building squeeze isn’t going to go away anytime soon. The shortages are really acute in timber.”

Lumber producers have reported record wood products revenue. West Fraser Timber Co., the world’s biggest lumber producer, said it will expand capacity at five U.S. mills. Interfor Corp. said last month it will buy four U.S. sawmill operations from Georgia-Pacific LLC.

©2021 Bloomberg L.P.

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